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Cost Guidelines

Summary of Allowable & Unallowable Costs

Reference: OMB Circular A-21, Section J.1 through 54, General Provisions for Selected Items of Costs, provide principles to be applied for establishing the allowability of certain items involved in eligible costs.

According to OMB Circular A-21, Section C: the composition of total costs of a sponsored program is comprised of the allowable direct costs incident to the performance of the agreement, plus the allocable portion of the allowable Facilities and Administrative costs. The District (YCCD) and/or the Colleges (MJC/CC) are responsible for ensuring that costs budgeted and charged to a sponsored program are allowable.

The purpose of the summary of allowable and unallowable costs categories serves as a quick reference guide to assist sponsored program administrators and/or Project Directors in clarifying the rationale and determining the allowability of selected items of costs for federally funded programs. This guide summarizex the common treatment of costs based upon A-133 Compliance Supplement, federal audit findins of various federal sponsored programs, and best practices by other sponsored program recipients.

The tests of allowability of costs or factors that affect the allowability of costs are as followed under OMB Circular A-21, Section C:

  • 2cfr200.404  Reasonable Costs - a cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the the time the decision was made to incur the cost.


  • 2CFR200.405 Allocable Costs - a cost is allocable if the goods and services involved are chargeable or assignable to that Federal sawrd or cost objective in accordance with the relative benefits received. 


  • Consistently Treated - accounted for in accordance with the appropriate generally accepted accounting principles (GAAP) and the Cost Accounting Standards (CAS).


  • Conforms to the limitations or exclusions - as set forth in OMB A-21, Section J, General provisions for selected items of costs, the sponsored program agreement as to the types or amounts of cost items.

The category that a selected item of cost falls under does not constitute an absolute allowability for the cost item. Specific situations may warrant limitations or exceptions to the treatment of the costs *.